Anonymous Internet Discussion Forum



### You are viewing a page indexed by search engine. All comments on the topic are put together without order and may be confusing to read. To see organized discussion click here. ###

why does credit have to be an integeral part of capitalism

Credit is an important part in any modern economy, not just Capitalism. People need credit to get expensive luxury goods without saving money for decades. But even luxury goods aside, it's difficult to afford a home on personal income alone, especially in the middle class.

I don't care if it is free money. I simply need money! Credit does not have to be an integral part of Capitalism but since it is profitable for both borrowers and lenders, therefore it appears to be a permanent feature of Capitalism. Credit enables entrepreneurs to enhance return on their equity in a firm provided rate of interest is lower than the required rate of return for the business. The pitfall is that over-leveraging can be fatal in an adverse economic environment and could be fatal for the firm.Because I need free money. It doesn't have to be a part of capitalism at all. Credit and loan are nowhere in the definition of capitalism. why does credit have to be an integeral part of capitalism
seems to me that capitallism is a good thing but it has become perverted by greedy thinking. back in the day people saved first then invested their own money in their endevor why is credit so important seems to me that people/buisnesses should save first then invest their own monies in thier future plans this to me is the main reason for the crises of today too masny people-financiers are using others ideas for self gain
The banking systems of the U.S., Communist China, India, Europe, Africa, South America, Mexico, Canada, Russia, etc. all work the same way. The creation of money by the extension of credit. If you want to call this capitalism, OK. Credit is intrinsic to the banking systems of the world. If knowledge of how the system works was widespread, the toxic abuse of the system might not be so profound and prevalent.A good explanation with additional linformation can be found at Economics Unbought.[1]Credit is as old as barter and the concept of trust. However it has been perverted to serve the needs of capitalists who produce nothing but only make money by moving money. Credit has been used to control economies such as the ocean of available credit for housing then the predictable (and planned) crash which then crashes an economy that depends on a healthy housing market. Witness the US (and world) from 2008 to current. " The government goes to the Fed every week and tells it how much it needs to borrow."
The Fed answers "gives us a package of bonds, notes and bills... and we will credit your checking account with the money requested. The government creates its promises to pay out of nothing and the Fed creates the money out nothing and they exchange."
This is followed by the commercial banks using fractional reserve banking to create money as well. [2] First, the answer to this question seems to lie in the answers to these questions: What is money? How is it created? Who creates it and how is it put into circulation?
The answers to these questions may very well be the definition of capitalism.
"Early monies were commodities used to facilitate trade, estimate market efforts, and store value between trades. Modern money functions similarly." [3]I would suggest to think about recoevering from a recession or financial crisis. The FED lowers interest rates, so more people can borrow. Countries do the same between each other. People have to borrow money in hard times in order to make money to recover in the future, and even raise living standards eventually. Would anyone agree that one of the main uses for credit, especially nowadays, is to jumpstart an economy? When society is suffering, people simply don't have the cash on hand to continue living at raised living standards. Investment banks make much more money from the credit market than the stock market. Much of the former is opaque and allows big profits to the middleman, whereas the latter is transparent whose brokering has become a commodity. Investment banks therefore have all the incentives to use their political muscle both to keep the credit markets opaque and to keep it going as fast as possible. Credit gives the illusion that your money is intact after you lend it out. You are holding a piece of IOU that is usually reliable. Utter chaos and terror occur when that turns out not to be the case, as in 2008. People are lulled into a sense of security, then boom. Direct investments in businesses are known to be risky from the start, and so are less destructive. Both the 1929 and 2000 stock crashes were fundamentally less devastating than the credit crash of 1931 and 2008. I am guessing that Western societies grew rich in the last 150 years due to innovations in technology and management, plus human capital, and it was the system of credit that hitched a ride on this prosperity, not the other way round. Certainly we would have slower growth without credit, but perhaps it would be healthier, safer, and ultimately more gratifying. If people knew they were investing in a venture, they would be more careful. We would not have too-big-to-fail scenarios. Credit is a shot in the arm for the economy but Western societies are currently addicted to it. Credit may be necessary but this system of credit is a banker's dream designed by bankers. For the rest of us it expands the money supply too fast and endangers our savings and economic stability. Certainly it will be painful to wean ourselves off it, but short pain will be better than long.hi welll I dont know 'how to NSWER THISCredit does have to be a part of capitalism. Credit is just another way of buying a good or service. Those who make loans are selling money for a profit. Those who borrow are paying for the ability to speed time, ie, the ability to have the money now they could accumulate more slowly over time.

In this sense, the credit market is just another exchange in our markets. Credit is an integral part of capitalism because you need to spend money to make money. And a lot of people have a great idea or a proven ability to execute an idea while using other peoples money, for example a stock broker who wants to start a hedgefun, but they have little to no startup capital Neo-colonialism is the reason why western countries are so much richer than under developed countries. Credit has less to do with wealth than with illusion of wealth. You get a car or a house today, but you give away your future in advance, years of your labor. [4] Because credit is the reason why western countries are so much richer now than they were 150 years ago and why it is so difficult to close the gap between developed and under developed countries. You do not need credit in an economy but without it the economy will begin to contract, unemployment will increase and living standards fall.

I don't understand why 'being legal process' implies that it 'has to be an integral part'...

Also, I don't understand how it is very healthy and good for people to spend their lives paying off debts, or to be more precise, paying most of their lives interest on those debts which are several times the value of the original price of service/goods. It only has to be for two reasons.
1. It is a legal process.2. It is very profitable for those who provide the service.Credit if not managed properly by an individual consumer can be a severe problem and a liability to the persons whole life.However, on a grand scale it is very healthy and good for the economy it puts more money into the economy brings products and services to people that otherwise might never be able to afford them. Credit is also an essential part of most businesses. Also, 'copyright' is something we associate with 'credit', but in a different sense. It presents a new landscape of business through the courts. Sue and be sued, the intellectual property bubble. [5] I have seen since the crash that credit is valuable to industry, the wealthy and most important, FINANCIAL/TRADING markets. AT 0% interest they may gamble & toss money around the globe unable, impssible to lose. Any interest bearing account will cover the losses. This is just the wash cycle; wait for rinse.[6] As soon as credit gets into a market, it spreads.

If 1 business suddenly has a load of cash (from a lender), it has a huge competetive advantage over others in the market.

To compete, or just stay afloat when faced with such a disproportionate (*) influence on the market, others must also seek external finance.

Big benefit: accellerated growth in the market.
Risk: the market is artificially & unsustsinably inflated.

(*) disproportionate to the current operating funds the business produce Credit is an important part in any modern economy, not just Capitalism. People need credit to get expensive luxury goods without saving money for decades. But even luxury goods aside, it's difficult to afford a home on personal income alone, especially in the middle class. Think of it as a Ponzi scheme: the need for more people to pay for the benefits of a few keeps increasing and eventually collapses, since the new people don't believe even more will join the program and pay for their benefits. My question is: why is the us reducing spending if we are already in debt? What do I mean by 'system can function'? Function satisfactorily for everyone? Everyone has a big house and two cars, or everyone survives and lives? Or functions without pollution and harm to the habitat? Or simply that system is sustainable?
Opinion on whether Earth is overpopulated depends on individual's preferences which are determined greatly by surroundings and not by some inherent need for certain amount of space. If you come from Australia, you are used to having huge space around you. If you come from Japan, you are used to sleeping in a box. Both populations are supported by their habitat. In overpopulated areas population would starve, which doesn't happen in these countries - by definition they are not overpopulated. [7][8]
[7][8] Capitalism is based on tiny elite and massive population in poverty. Because of that it can never be sustainable. We need a new system.... but no system can function with this size world population...
Capitalism is about as good as any other system, whether it be Socialism, Communism, or anything of the sort. All of them usually result in an oligarchy gaining all the power or all the money and imposing their power on everyone else to, in turn, increase their power / money.
Capitalism is an economic system where means of production are privately owned. Hence it is synonymous with a market economy. Therefore competition and individual property rights also lie at the heart of its ideology. However, for many people to be able to afford things such as homes, and for entrepreneurs to 'engage' with the institution and provide services etc, credit needs to be provided so these commodities can initialy be purchased.
Watch Zeitgeist (Addendum) and it kinda goes into what you wanna know. Fantastic movie in general. and yes, there really is no such thing as free money. you're not really even losing money because there's no real money to start off with. [9]The US economy is "debt based". There is no free currency, only that created by bonds from a private corporation called "The Federal Reserve". The "Fed" is allowed to create money from nowhere, and charge interest for loaning it to the US Government. Not only that, but the loans are guaranteed by the taxation power of the US Government. Sweet deal huh? It's the biggest scam ever conceived. So credit is an integral part of what we call capitalism in the US. this is a very true statement Credit can be took after certain period. For getting more money people save it in bank so that they can get extra credit money. and then bank use it different purposes dur to which money remain in circulation. And circulation of money is good for economy. I think credit is a socialist aspect of mixed capitalism and socialism. It is a way of getting money out there for people to spend and businesses to make. Without it, people would be forced to curtail most or all of their consumption whenever their funds got low. This in turn would force businesses to either lower their prices or wait until consumers got enough money to spend again - which could take a long time if prices remain high or go higher.

It smooths out prosperity. The cost is interest. Purchasing luxury goods not the issue. Credit to provide working capital to small and large business truly is the "grease" of our economic machine. Beyond that, credit is a dangerous tool allowing you to spend your descendants' assets; it used to be you'd bequeath assets to your heirs, now the flow is reversed.

Credit is not free money. It comes with a big interest rate. You think you are getting money, but you are actually loosing it.

Expand a current thought with...



copyleft © 2011 - About - Terms of use